Summary and Analysis

Aggregate Demand

Shifts in the Aggregate Demand Curve

Test

Problem :
What are two uses for the aggregate demand curve?

The aggregate demand curve tells how the price level and output and
income are related. It shows the general effects of changes in many
economic variables on the relationship between price level and output and
income.

Problem :
What is the effect of a shift in the aggregate demand curve to the left?

When the aggregate demand curve shifts to the left, the total quantity of goods
and services demanded in an economy decreases as the price level increases.

Problem :
What is the effect of a shift in the aggregate demand curve to the right?

When the aggregate demand curve shifts to the right, the total quantity of goods
and services demanded in an economy increases as the price level decreases.

Problem :
Give three examples of events that will shift the aggregate demand curve to the
left?

Examples of events that will shift the aggregate demand curve to the left
include exogenous decreases in consumption, investment, and net
exports, an increase in the savings rate, a decrease in the marginal
propensity to consume, an increase in the interest rate, and an increase in
the real exchange rate.

Problem :
Give three examples of events that will shift the aggregate demand curve to the
right?

Examples of events that will shift the aggregate demand curve to the right
include exogenous increases in consumption, investment, and net exports, a
decrease in the savings rate, an increase in the marginal propensity to consume,
a decrease in the interest rate, and a decrease in the real exchange rate.